Corel said to be mulling Linux sale

The troubled Canadian software maker is preparing to sell its Linux interests, according to industry sources.

Mary Jo Foley
Mary Jo Foley
Mary Jo Foley has covered the tech industry for 30 years for a variety of publications, including ZDNet, eWeek and Baseline. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008). She also is the cohost of the "Windows Weekly" podcast on the TWiT network.
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Troubled Canadian software maker Corel is preparing to sell its Linux interests, according to industry sources.

New York venture capital firm Linux Global Partners (LGP) is poised to sign a letter of intent to purchase Corel's Linux business, the sources say.

The dollar value of the deal was not known. But one source said Corel would receive $5 million in cash for its Linux arm and retain 20 percent rights to the new LGP-owned Linux company.

LGP vice president of communications Joe Orlando said LGP "looks at lots of deals and to discuss any one in particular would be premature."

Corel did not respond immediately to a request for comment.

Sources indicated in November that Corel was shopping around its Linux business. At the time, LGP was named as one of the parties interested in the purchase.

Corel's decision to sell its Linux business was in some respects expected, but in other ways it comes as a surprise.

At the Comdex trade show last month, Corel CEO Derek Burney said that Corel was not abandoning Linux, even though the company's original Linux champion, former CEO Michael Cowpland, resigned in August.

In fact, Burney said Corel was working on new ways to package its desktop-oriented Linux distribution, which is based on Debian Linux.

Some industry watchers, however, predicted Corel would dump Linux as soon as Cowpland left. They said the software maker--which cut 320 jobs this summer to save money--needed cash more than it needed Linux.

In October, Corel obtained a $135 million investment from Microsoft in exchange for Corel's pledge to make its products compliant with Microsoft's .Net technologies.

LGP is a holding company which, as of March 2000, had purchased interests in six Linux companies, plus options in another five Linux-related companies, according to the LGP Web site. LGP does not own any companies outright but does hold controlling stakes in several. Typically, LGP does not take a stake of less than 20 percent to 25 percent in its partner companies.

Among LGP's "partner companies" are Helix Code, Code Weavers (the company behind the Windows-to-Linux porting project called WINE), and Gnumatic (formerly GnuCash).

Sources said LGP was not the only company interested in buying Corel's Linux business.

A stealth-mode start-up in Ottawa called TransGaming Technologies--comprising a number of former Corel staffers--was said to have helped broker the deal between Corel and LGP.

TransGaming executives declined to comment on the reports.